Banking and Finance Law | Law
Center for Contract and Economic Organization
Among the many by-products of the phenomenal growth of consumer credit in the last two decades has been the attempt on the part of existing legal institutions to grapple with the problem of coercive debt collection. The existence of the problem is no longer disputed, and the nature and extent of the abuse surrounding debt collection practices has been the subject of voluminous commentary. Given the dynamics of the competing interests involved when a creditor attempts to collect a just debt which the debtor is unable to pay, an essential conflict requiring regulated resolution becomes apparent. Unfortunately, the problem is compounded when it is recognized that the debt may not be validly due and owing, that the debtor may have a defense, real or perceived, or that the debtor may merely be unwilling to pay, either in fact or as perceived by the creditor. Since the information available to either party is imperfect, it frequently is impossible to determine the actual dimensions of the conflict as viewed from the varying perceptions of the parties. The inevitable result of the inability of either party to assess accurately the optimum means by which any given conflict should be resolved has been the development of a series of abusive collection tactics and practices utilized by debt collectors in attempts to recover outstanding obligations.
The extent of such practices is difficult to determine. When questioned about their techniques, firms engaging in debt collection universally report that they have promulgated policies against harassment in an effort to maintain customer good will. To the extent that such statements can be accepted without question, the abusive practices which do occur must be attributed to overly aggressive individual collectors possibly concerned with default ratios as a reflection on their job performance. Such collectors, of course, are reluctant to discuss these practices candidly, making it difficult to measure accurately the extent of harassment tactics by surveying the collection industry. On the other hand, compiling accurate empirical data on collection practices through a consumer sample is equally difficult. Debtors have a tendency to exaggerate descriptions of contacts made by the debt collector. They may be acutely sensitive to any collection attempt, no matter how harmless it might seem to an objective outsider, and their reports may reflect their resentment.
Those engaging in debt collection should be entitled to a presumption of regularity in view of the absence of data revealing the true extent of offensive collection practices. It may be assumed that the great majority of all lending institutions, credit sellers, and collection agencies employ acceptable methods in their attempts to encourage the debtor to pay. Nevertheless, in today's credit-oriented society, attention must be directed toward the small minority of firms involved in coercive and overreaching activities. With over $180 billion of credit currently outstanding and an average per capita indebtedness of $900, it is reasonable to assume that few consumers are untouched by the credit industry. Since credit plays such a major role in consumer transactions, it is vital that collection practices be effectively regulated.
Robert E. Scott & Diane M. Strickland,
Abusive Debt Collection – A Model Statute for Virginia,
Wm. & Mary L. Rev.
Available at: https://scholarship.law.columbia.edu/faculty_scholarship/319